2 | Doing Business in A LEGAL FACT SHEET

GOVERNMENT AND LEGAL SYSTEM CONTRACTS AND LEGAL DOCUMENTATION Malaysia is a constitutional monarchy headed by a Commercial contracts are mainly written in English Yang Di Pertuan Agong (“King”) who is elected although certain government related contracts may every 5 years by a Council of Rulers. A federal be written in Bahasa Malaysia as well as in English. system of government links together 13 states and Malaysian courts will recognise contracts regulated the federal territories of (financial and by a foreign law provided that the foreign law can be commercial capital of Malaysia), Putrajaya clearly presented and explained. Malaysian courts (administrative centre of the Federal Government) will generally also recognise a valid judgment of a and Labuan (International Offshore Financial Centre foreign court. of Malaysia). Freedom of contract is the underlying philosophy of Malaysia’s legal system is based upon English contract law and as such the terms of contracts may common law. The Civil Law Act, 1956 incorporated be agreed between the parties after negotiations. principles of English common law as at 1957 However, certain statutes may incorporate (Malaysia’s year of independence). As a result, compulsory terms into certain contracts for common law doctrines have been adopted into consumer protection. Provided that the contract is Malaysian jurisprudence and applied by Malaysian not for an illegal purpose or consideration or courts. English cases as at 1957 are immediately contrary to public policy, the reasonable contractual binding on Malaysian courts but cases after 1957 intention of parties which has been clearly together with decisions of courts of other expressed or evidenced will be upheld regardless of Commonwealth countries continue to have the nationality of the contracting parties. persuasive authority and are considered by Malaysian courts in arriving at their judgments. BUSINESS ENTITIES Business in Malaysia can be carried out either as a The states of Sabah and Sarawak in sole proprietorship, a partnership or a company. joined the then in 1963 to form the Federation of Malaysia. The agreement between Sole proprietorships and partnerships must be the then Federation of Malaya and the 2 states registered with the Companies Commission of granted those states autonomy in certain matters. Malaysia (“CCM”) under the Registration of Business As a result, the laws in the 2 states are not identical Act, 1956. However, only Malaysian citizens and to those of the other 11 states in Peninsular permanent residents can be registered as sole Malaysia. proprietors with the CCM. As a matter of practice, the CCM does not permit companies (whether Malaysian commercial law comprises of case law locally incorporated or foreign) or foreign individuals and statute law. Case law is based upon the to be registered as partners in a partnership. doctrine of stare decisis where courts are bound by precedence. This means that a decision of a Limited liability partnership has been proposed but superior court is binding upon itself as well as upon as of date, partnerships with limited liability are still inferior courts. Statute law is passed in accordance not permitted, except for offshore limited with the constitution and becomes law upon partnerships in Labuan, under the Labuan Offshore receiving the royal assent from the King. Limited Partnerships Act, 1997. Partners of a business are advised to draw up a formal The guarantees the rule of partnership agreement governing their rights and law and also establishes the separation of powers obligations. In the absence of a partnership between Parliament, the Executive and the Judiciary. agreement, the provisions of the Partnership Act, All matters relating to land and religion are the 1961 will apply. Business partnerships of more than prerogative of State Governments. Islamic 20 members for the acquisition of gain are generally jurisprudence is predominantly limited to Muslims not permitted and should be incorporated under the and their property and seldom enters the realm of Companies Act, 1965 (“CA”). corporate commercial transactions except where Islamic financing instruments are used. Under the CA, 3 main types of companies may be incorporated or established in Malaysia: COURTS • a private limited company which has liability The courts of Malaysia are divided into Subordinate limited by shares; Courts and Superior Courts. The Subordinate Courts • a public limited company which has liability have limited jurisdiction and comprise the Magistrate limited by shares; and Courts and the Sessions Courts. The Superior • a company limited by guarantee only. Courts comprise the High Court of Malaya, the High Court of Sabah, the High Court of Sarawak, the All 3 types of companies are corporate entities and Court of Appeal and the Federal Court. English is have separate legal identities and may enter into predominantly used in the Superior Courts but legally binding commitments, sue and be sued. Bahasa Malaysia (the national language) is more Companies limited by shares are the most frequently commonly used in the Subordinate Courts. Doing Business in Malaysia A LEGAL FACT SHEET | 3

used in Malaysia. Private limited companies are Association of the company or agreed by the known as ‘Sendirian Berhad’ or ‘Sdn. Bhd.’ (for short) shareholders of the company. Board meetings may and public limited companies are known as ‘Berhad’ be held via teleconferencing. or ‘Bhd.’ (for short). Another popular form of business organisation is the A joint venture may be formed between a foreign Operational Headquarters (“OHQ”) which has been company and a local entity by agreement permitted by the Malaysian government to promote (unincorporated joint venture) or by forming a the use of Malaysia as a regional base for providing company in which the parties to the joint venture are management services to affiliates outside Malaysia. shareholders (incorporated joint venture). In order to qualify for tax incentives, the OHQ must demonstrate that it provides qualifying services to its Prior to the incorporation of a company, an offices or related companies within and outside application must be done to determine if the Malaysia. It is also possible to set up a proposed name of the intended company is representative office/regional office which will entitle available. The proposed name of a company will be a foreign party to establish an office in Malaysia rejected if the name already exists in the records of albeit as a cost centre only. A representative the CCM. Certain names may also be rejected for office/regional office may not transact business or policy reasons. The incorporation process takes effect sales. approximately 1 week after the proposed name of the company is approved. It is also possible to The CA permits the registration of a branch of a purchase ‘shelf companies’ but in doing so, it is foreign company in Malaysia. The branch operates important to ensure that these companies do not as an extension of the foreign company and is not a have liabilities. separate legal entity. A branch of a foreign company may be permitted to carry on business in Malaysia. The constitutional documents of a company are called the Memorandum of Association and the Federal as well as local government licenses may be Articles of Association. These documents must be required to carry out certain businesses. For filed with the CCM. Companies must also file annual instance, companies engaging in manufacturing audited accounts and other returns with the CCM activities with a paid up capital of RM2.5 million and showing changes to shareholders, directors or above or who employ more than 75 full time secretaries and special resolutions passed by them. employees would require a manufacturing license from the Malaysian Industrial Development Authority. All companies must have at least 2 initial subscribers. Companies normally apply for an initial authorised EQUITY CONDITIONS share capital of RM100,000 to save costs and time The Malaysian government established a Foreign of having to enlarge the minimum authorized share Investment Committee (“FIC”) in 1974 to capital later. However, it is not necessary to have all implement equity and ownership guidelines to the authorized capital issued and fully paid up. enhance the level of bumiputra (indigenous Malaysian) participation in the economy. The FIC There may also be different capital requirements for implemented policy guidelines that generally certain industries. For instance, companies restricted foreign ownership to 30%. Over time as engaging in wholesale and retail trade must comply Malaysia liberalised its economy the restrictions with the policy on foreign participation in Distributive under the FIC guidelines have been progressively Trade Services administered by the Ministry of relaxed and restriction for acquisition of interests, Domestic Trade and Consumer Affairs. This policy mergers and takeovers were finally repealed on 30 requires all wholesale and retail businesses with June 2009. However, the overall objective of 30% foreign interest to operate through a locally bumiputra equity participation has not been incorporated company with the following minimum abandoned completely as equity conditions for capital requirement: investments will continue to be imposed by the • RM50 million for hypermarkets (also restrictions relevant sector regulators. For instance, foreign on location); ownership in existing stock broking companies, • RM20 million for department stores; unit trust management companies for the retail • RM25 million for supermarkets; segment, investment banks and insurance • RM5 million for direct selling entities; and companies is restricted to 70%. Foreign equity • RM1 million for ‘specialty outlets’. restrictions will also be applied in 'strategic industries' such as telecommunication, ports, All companies must have at least 2 resident directors. energy and transport. There is no requirement that the 2 resident directors must be Malaysian citizens. There must also be a On the other hand full foreign equity holding is duly qualified and licensed person to act as a allowed in: company secretary. A circular or paper resolution • 27 sub-sectors of the service industry including may be adopted if this is allowed by the Articles of health, tourism, transport and computer related services; 4 | Doing Business in Malaysia A LEGAL FACT SHEET

• Multimedia Super Corridor (“MSC”) companies • gains or profits from trade, profession and and approved companies carrying out promoted business; activities in designated areas (see discussion on • gains or profits from employment (salaries, Growth Corridors below); remuneration, etc.); • manufacturing companies licensed by the • dividends, interests and discounts; Ministry of Trade and Industry; • rents, royalties or premiums; • approved OHQs, representative offices and • pensions, annuities or other periodic payments; regional offices, Labuan offshore companies and and companies that are granted the status of • other gains or profits of an income nature. international procurement centre; • companies listed on Bursa Malaysia Securities A company, whether resident or not, is liable for Berhad (“Bursa Malaysia”), Malaysia’s only corporate income tax currently at the rate of 25% on approved securities exchange (however, income accrued in or derived from Malaysia (a companies with Malaysian based operations company carrying on petroleum upstream going for initial public offering are required to operations is subject to a petroleum income tax of offer half of the 25% public spread shares to 38%). A company is considered resident in Malaysia Bumiputra); and if the control and management of its affairs are • companies endorsed by the Secretariat of the exercised in Malaysia. Malaysian International Islamic Financial Centre, which is an initiative to position Malaysia as a Labuan offshore companies and other Labuan hub for international Islamic finance. entities that are taxed under the Labuan Offshore Business Activity Tax Act, 1990 have the option of FOREIGN OWNERSHIP OF REAL PROPERTY electing annually to pay 3% of audited net profits or Transfer of properties valued at RM20 million and a fixed sum of RM20,000 as the corporate tax for above from bumiputra or government interest will income from ‘offshore trading activities’. The income have to be approved by the Economic Planning from ‘offshore non-trading activities’ such as the Unit in the Prime Minister’s department. Foreigners holding of investments in securities, loans, deposits are not allowed to acquire properties below the and immovable properties as well as the threshold level of RM500,000. For residential management of estate, is tax-exempt, unless they properties the threshold is temporarily set at are carried on as part of the offshore trading RM250,000 until the end of 2009. activities. Effective from year of assessment 2009, Labuan offshore companies can also make an Additionally, the National Land Code, 1965 provides irrevocable option to be taxed under the Income Tax that, with the exception of industrial land (i.e. land Act 1967 so that they can enjoy the tax treaty used for the purposes of erection or maintenance of benefits with countries who have specifically factories, workshops, warehouses or other buildings excluded Labuan in their tax treaties with Malaysia. where any manufacturing, processing or storage activities take place), all foreigners must obtain the All individuals are liable to personal income tax on prior approval of the relevant state authority before taxable income accrued in or derived from Malaysia. acquiring property in West Malaysia. The state The rate of tax depends on the residency status of authorities have the discretion to consider the the individual. The residency status of an individual acquisition based on the area or location of property, is determined by the duration of his stay in Malaysia. types of property and percentage of total units in a Generally, an individual is regarded as a tax resident project. The state authorities may also impose if he has been in Malaysia for at least 182 days in a conditions relating to foreign ownership of land held calendar year. Resident individuals are taxed at under leasehold title. scaled rates of up to a maximum of 27%, while non- resident individuals are subject to a flat tax rate of A foreign company that intends to construct its own 27%. retail premises in order to carry out its operations in Malaysia must do so in a commercial zone. In Payment to non-resident individuals are subject to addition, the relevant state authority may impose withholding tax of 10% on royalties, and special further restrictions on the permitted use of certain classes of income such as use of moveable lands. property, technical advice, assistance or service and installation services on supply of plant and TAXATION machinery; and 15% on services of a public Generally, all income of companies and individuals entertainer. accrued in or derived from Malaysia is taxable. Foreign sourced income remitted to Malaysia (other Sales tax is an ad valorem tax levied on certain than by companies carrying on the business of imported and locally manufactured goods. The banking, insurance, air and sea transportation) are current rates ranges from 5% to 10% (specific rates exempted from tax. Sources of income which are are imposed on certain classes of petroleum). liable to income tax are as follows: Doing Business in Malaysia A LEGAL FACT SHEET | 5

Service tax is a consumption tax (currently at 5%) merchant banks. Licensed onshore banks and imposed on certain prescribed services provided by approved merchant banks may extend credit specific group of taxable persons. Taxable services facilities in foreign currency to non-residents for any includes health services, parking space services, purpose. In addition, banking institutions may extend communication services, courier services, credit facilities in Ringgit up to an aggregate limit of professional and consultancy services provided by RM10 million to a non-resident (excluding a non- advocates and solicitors, professional engineers, resident stockbroking company, custodian bank or licensed surveyor/valuers, registered appraisers and correspondent bank) for any use in Malaysia. estate agents, architects, public accountants, Residents, bank or non-bank, may subject to their advertising companies and consultants, insurance own internal credit assessment guidelines extend companies, motor vehicle service and/or repair immovable property loans in Ringgit to a non- centers, employment agencies and recreational resident to finance/refinance the purchase or clubs. construction of any immovable property in Malaysia (purchase of land only is not permitted). Import duties are levied on a large number of imports to protect certain developing industries. All exchange control regulations are applied However, many of these will be removed in line with uniformly to transactions with all countries, except the Malaysian government’s commitment to trade Israel for which special restrictions apply. Exchange liberalization driven by agreements under the World controls are, however, subject to changes and Trade Organization (WTO) and obligations under modifications from time to time. free trade agreements. Export duties are imposed on the country’s main commodities like crude INTELLECTUAL PROPERTY LAWS petroleum and palm oil. Excise duties are levied on Malaysia has extensive and progressive legislation selected products manufactured locally or imported in the field of intellectual property rights protection. into Malaysia, namely, cigarettes, liquors, playing The principal statutes dealing with intellectual cards, mahjong tiles and motor vehicles. property rights are: • Trade Marks Act, 1976; A variety of tax incentives are available for • Patents Act, 1983; companies that produce promoted products or • Copyright Act, 1987; and engaged in promoted industries. In recent years • Industrial Designs Act, 1996. incentives have also been given to the service sector especially for those involved in Islamic The classification of goods and services under the financial services, ICT, research and development. Trade Marks Regulations 1997 is in line with the These incentives include the grant of pioneer status Nice Classification of goods and services for the to qualifying companies, investment tax allowance, purposes of registering trade marks and service re-investment allowance, export incentives, research marks. Malaysia is a party to the Agreement on and development incentives, abatement of tax for Trade Related Aspect of Intellectual Property Rights training and R&D activities, tax exemptions for OHQ (“TRIPS”). Hence Malaysian intellectual property and abatement of tax for the use of Labuan as an rights will be granted the same recognition and offshore financial centre. protection in other TRIPS member countries provided local registration requirements are met. EXCHANGE CONTROL Malaysia has introduced a number of statutes in Non-residents can bring in any amount of foreign order to be TRIPS compliant including the currency notes and/or traveller’s cheques provided Geographical Indications Act 2000 and the that any amounts in excess of the equivalent of Protection of New Plant Varieties Act 2004. US$10,000 must be declared. Non-residents would need to seek permission from the Controller of Malaysia has also acceded to the World Intellectual Foreign Exchange (“Controller”) if the amount of Property Organisation’s (“WIPO”) Patents foreign currency notes to be carried out of Malaysia Cooperation Treaty (“PCT”) and as such the PCT exceeds the amount brought in and is more than the has been adopted into national law. The owner of a equivalent of US$10,000. Non-residents may bring foreign patent, who is a citizen of a PCT signatory in or out of Malaysia, Ringgit notes of up to RM1,000. country or who has registered or is seeking All payments, including the repatriation of capital, registration of his patent in a PCT signatory country profits, dividends, interest and rental are freely can apply via the International Bureau of WIPO in permitted. Geneva, or through his local patent’s office for the registration of the patent in Malaysia. There is no restriction on payments to non-residents for import of goods and services but such payments Trade marks, patents and industrial designs must be made in foreign currency. registered in Malaysia have protection under Malaysian laws for 10 years, 20 years and 5 years, There are no restrictions on non-residents to open respectively. The period of registration for trade and maintain Ringgit denominated accounts with marks can be renewed indefinitely for periods of 10 licensed onshore banks, financial institutions and 6 | Doing Business in Malaysia A LEGAL FACT SHEET

years per renewal subject to payment of the undertaking merger and acquisition with a prescribed renewal fees. The registration period for biotechnology company; and industrial designs can be renewed for 2 further • accelerated Industrial Building Allowance over a consecutive terms of 5 years each subject to period of 10 years for buildings that are used payment of the prescribed renewal fees. The basic solely for the purpose of biotechnology research term of a copyright is the life of the author plus 50 activities. years after his death. As a party to the Cartagena Protocol, Malaysia Intellectual property rights are also protected under gazetted the Biosafety Act 2007 on 30 August the common law. For example, unregistered trade 2007 to regulate the release, importation, marks may be protected under the law of passing off exportation and the contained use of living and action may be brought against any person who modified organisms. injures the reputation or goodwill which attaches to the trade mark. Non-registrable trade secrets and GROWTH CORRIDORS other valuable confidential information are also protected under the English law doctrine of breach The Multimedia Super Corridor of confidence. The Malaysian government has created a special zone which extends from the Kuala Lumpur City BIOTECHNOLOGY Centre to the Kuala Lumpur International Airport in To develop Malaysia’s biotechnology potential, a Sepang, known as the MSC to promote Malaysia’s National Biotechnology Policy was launched on 28 competitiveness in IT and multimedia. April 2005 and the Malaysian Biotechnology Corporation Sdn Bhd, a dedicated government Companies which obtain ‘MSC status’ from the agency, was established to oversee, promote and Multimedia Development Corporation enjoy certain coordinate the development of Malaysia’s incentives guaranteed by the Malaysian government biotechnology industry. Various tax incentives under a Bill of Guarantees, including: have also been drawn up to support biotechnology • world class physical and information ventures. The incentives that are currently infrastructure; available to a qualified company undertaking • unrestricted employment of foreign knowledge biotechnology activity that has been approved with workers; bionexus status by the Malaysian Biotechnology • freedom of ownership of MSC status companies; Corporation Sdn. Bhd. (“Bionexus Company”) are: • free mobility of capital and finance; • 100% income tax exemption for 10 years • competitive financial incentives including 100% commencing from the first year the company income tax exemption for profits derived from derives profit or Investment Tax Allowance of MSC status qualifying activities or 100% 100% on the qualifying capital expenditure investment tax allowance for up to 10 years; incurred within a period of 5 years; • intellectual property rights protection in line with • exemption of import duty and sales tax on raw international laws; materials/components and machinery/equipment; • freedom from censorship of the internet; • double deduction on expenditure incurred for • competitive telecommunication tariffs; research and development; • eligibility to tender for key MSC infrastructure • double deduction on expenditure incurred for the contracts if the MSC is used as a regional hub; promotion of exports; and • dividends distributed from the Bionexus • one-stop processing of regulatory approvals. Company will be treated as tax exempt income for its shareholders; A series of cyber laws designed to put Malaysia at • tax deduction for a company that invests in a the forefront of law reform in relation to the Bionexus Company, equivalent to the amount of regulation of information technology and multimedia investment made in that subsidiary provided that have also been put in place following the creation of the investing company owns at least 70% of that the MSC. They include: subsidiary; • Computer Crimes Act, 1997; • concessionary tax rate of 20% on income from • Digital Signature Act, 1997; qualifying activities for 10 years upon the expiry • Telemedicine Act, 1997; of the tax exemption period to a Bionexus • Communications and Multimedia Act, 1998; company; • Optical Discs Act, 2000; and • tax deduction equivalent to the total investment • Layout Designs of Integrated Circuits Act, 2000. made in seed capital and early stage financing

for a company or an individual investing in a

Bionexus Company;

• stamp duty and real property gains tax exemption within a period of 5 years until 31 Iskandar Malaysia (“Iskandar”) is a special economic December 2011 for a Bionexus Company zone in the southern state of Johor. Companies Doing Business in Malaysia A LEGAL FACT SHEET | 7

undertaking creative industries, educational services, financial advisory and consulting services, All Malaysian employees (other than domestic healthcare services, logistic services and tourism helpers and those above 55 years old) are required related services (“Qualifying Activities”) can apply to to make a statutory contribution of 11% of their the Iskandar Development Region Authority (“IDRA”) gross salary to the Employee Provident Fund to obtain ‘IDRA status’ and enjoy a host of incentives (“EPF”). [The rate of contribution from employees for their operations within the IDR. The incentives has been temporarily reduced to 8% till December include: 2010 to boost economic growth in view of the global • corporate income tax exemption for 10 years, financial crisis.] Employers are required to make a upon commencement of operations in respect of statutory contribution of 12% of the employee’s income from Qualifying Activities carried out gross salary to EPF. Foreign citizens are exempted within the approved location for customers from making EPF contributions but they may elect to located within the approved locality and outside contribute, if they wish. Malaysia or wholly outside Malaysia provided that it is before the end of year 2015; IMMIGRATION PROCEDURES • withholding tax exemption on payments for All persons entering Malaysia must possess a valid services and royalties to non-residents for 10 international passport or other internationally years upon commencement of operations; recognized travel document valid for travel to • exemption from FIC rules; Malaysia. The passport or travel document must be • freedom to source capital globally; valid for at least 6 months beyond the date of entry • unrestricted employment of foreign employees to Malaysia. Persons who are not in possession of a within the approved zones; and recognised passport must apply for a document in • flexibilities under the foreign exchange lieu of a passport at any Malaysian Representative administration rules. Office abroad.

Other corridors A visit pass for the purpose of a social, tourist or There are 4 other regional economic zones namely business visit may be obtained at the point of entry if the Northern Corridor Economic Zone, and the the visitor can satisfy the immigration authority at the Eastern Corridor Economic Zone in Peninsula point of entry that he has a valid passport and visa Malaysia and the Sabah Development Corridor and (where applicable) which allows him to stay the Sarawak Corridor of Renewable Energy in East temporarily. The types of passes issued are as Malaysia. These are part of Malaysia’s development follows: planning and various incentives will be given to spur • Visit Pass (Social or Tourist); and the economic growth in these areas. • Visit Pass (Business).

EMPLOYMENT Foreign visitors, who have entered Malaysia on a Generally, parties are free to agree on the terms of social pass may apply to the Immigration employment contracts. However, a minimum level Department to convert their pass into a business of statutory protection under the Employment Act, visit pass. A person seeking employment in Malaysia, 1955 is afforded to manual workers and must apply for one of the following passes: employees whose monthly salaries do not exceed • Visit Pass(Temporary Employment/Professional); RM1,500. This protection mainly relates to medical • Employment Pass (for foreigners entering the benefits and leave taking. country to take up employment for a minimum period of 2 years and earn a monthly income of The Industrial Relations Act, 1967 ensures that RM5,000 or more); or employees are fairly treated and that due process is • Dependant’s Pass (for the wife and child of any observed in the termination of employment. foreigner who applied for or have been issued Generally, an employer does not have unfettered with an Employment Pass). right to hire and fire his employees. An employer is only entitled to terminate employees for just cause All such applications must be sponsored by a or excuse and such a right is subject to industrial Malaysian who agrees to be responsible for the adjudication. Just cause and excuse could be either maintenance and repatriation of the visitors from misconduct, negligence or poor performance and Malaysia should it become necessary. Foreign the onus is on the employer to establish his spouse of a Malaysian citizen (legally married under allegations. Given such a burden, proper procedures Malaysian law) with a permanent job offer can apply must be adopted in order to show that just cause or for an employment pass. Spouses of expatriates excuse exist. with professional qualifications are allowed to work in Malaysia.

The Trade Unions Act, 1959 permits the formation of Foreign owned companies are allowed to bring in employee unions. However, the powers of these expatriate personnel in areas where there is a unions are limited. shortage of trained to do the job and for 8 | Doing Business in Malaysia A LEGAL FACT SHEET

‘key posts’, that is, managerial posts essential for affairs, sometimes lasting many years. If a monetary companies to safeguard their interests and claim can be supported by clear evidence, a investments. The banking, insurance and capital summary procedure may be adopted to obtain market industries are accorded greater flexibility to judgment without a trial. This procedure may permit employ foreign specialist expatriates that have a plaintiff to obtain judgment within 6 months to 1 expertise to contribute to the development of the year. This procedure is seldom used for other claims. financial system in Malaysia. The Malaysian Mediation Centre and the Mediation An expatriate officer who is transferred from one Committee under auspices of the Bar Council of post to another within the same company is also Malaysia are actively promoting mediation as an required to obtain a new employment pass. A new alternative method of dispute resolution. Mediators expatriate officer replacing another is also required do not generally refer to any legal authorities and to obtain a fresh employment pass. The holder of an play a facilitating role in assisting conflicting parties employment pass will be issued with a multiple entry to reach an agreement. As a mediator's decision is visa valid for the period that corresponds with the not binding, the parties still have the option of validity period of the employment pass. resorting to legal action in court.

Foreigners who fulfill certain criteria can apply under Arbitration is encouraged in Malaysia and there are the Malaysian My Second Home Programme to stay comprehensive arrays of facilities and services to in Malaysia (together with their spouses, unmarried facilitate arbitration in Malaysia. Both domestic and children below 21 years old and parents above 60 international arbitrations are governed by the years old as dependants) on a social visit pass with Arbitration Act, 2005 which is based on the multiple entry visa for 10 years, renewable UNCITRAL Model Law on International Commercial indefinitely. Arbitrations. However, Part III of the Arbitration Act contains 7 provisions which apply only to domestic ENVIRONMENT arbitrations unless parties to international The Environmental Quality Act, 1974 is the existing arbitrations have ‘opted in’ for these provision to legislation that governs the prevention, abatement, apply to their arbitrations. One of the key provisions control of pollution and enhancement of the in Part III of the Arbitration Act is Section 42 which environment in Malaysia. This Act and the provides for references to the High Court on points regulations thereunder establish standards for of law arising during and after the arbitration. Parties projects. are free to determine the number of arbitrators but in the absence of any determination, the arbitration In efforts to promote energy conservation and tribunal shall consists of 3 arbitrators for discourage excessive energy consumption, international arbitration and 1 arbitrator for domestic companies are given tax incentives for provision of arbitration. The substantive law for international energy conservation activities. arbitrations will be decided based on the common law principles for determining ‘proper law’. DISPUTE RESOLUTION Civil claims may be commenced in the Subordinate The Kuala Lumpur Regional Centre for Arbitration Courts or the High Court depending on the size of established under the auspices of the Asian-African the claim. The jurisdiction of the Magistrates Court Legal Consultative Committee (an inter- and Sessions Court is limited to RM25,000 and governmental organisation) acts as the appointing generally, all claims above RM250,000 must authority for arbitrators, where there is no agreed commence in the High Court. The Subordinate procedure in the arbitration agreement or where the Courts do not have power to grant equitable or agreed procedure has failed. injunctive relief. Trials are lengthy and drawn out